Matt and I got talking about immigration off an earlier blog. He asked:

“Could it be that Brisbane feels more at like home for people from the rural North Island and South Auckland than Southland or Auckland City do?”

It got me thinking about why people migrate.

I am currently reading “Exodus” by Paul Collier. (I am only a few chapters in, but it is a good read.) He writes that there are three big drivers of migration. I am paraphrasing from page 38:

It is an economic response to the gap in income. All else equal, the higher the income gap, the stronger the pressure to migrate.

There a number of impediments to migration (economic, legal and social). Costs must be borne before benefits can be reaped. The poor are least able to meet the cost of investment and act as a counter to 1.

Costs of migration are reduced by the presence to a diaspora.

Using this model, it seems pretty clear why New Zealanders choose to migrate to Australia. They reinforce each other:

Australia’s wages are typically around 30% higher than in New Zealand. So the income gap encourages migration.

The impediments to moving to Australia are relatively low. While not eligible for social welfare, New Zealanders are able to work and live in Australia with few legal impediments. The cultural and social gaps are also rather small – even if it is made out to be rather wide. Speaking from person experience – and this is not mean to offend anyone – I found living in Melbourne not too dissimilar to living in Wellington (in a more grown up way). The actual cost of flying there isn’t high either.

New Zealand has a large diaspora in Australia. According to the Australian Census, around 500,000 New Zealand citizen live there. The most popular are QLD (40%), NSW (24%), VIC (17%) and WA (15%). The New Zealand diaspora encourages migration.

The framework in Paul Collier’s book suggests that migration to Australia will accelerate over time, because the key drivers are reinforcing each other.

I’ve seen another study which looks at the reasons for migration with temperature being the best single predictor. People like warm places (as well as the economic reasons). But this also reinforces the diaspora to Aus.

Its not clear whether its a linear relationship – it can get too hot! QLD has a lot of NZers for example, but less so in WA. On my eyeball econometrics it looked to be as much a function of economic opportunities (good job prospects in mining, construction, distribution, retail and hospo), distance from NZ and the size of the diaspora…

One thing I’d note with all this is that we need to be careful considering the “stock” and “flow” concepts of migration.

The “diaspora” narrative is one of transition between equilibrium for the stock of New Zealand residents in another country. When there is some shock that leads to more people heading over to Aussies, this leads to more people going over in the future, but unless our view is that everyone is going to move to Australia this process must eventually peter out.

The wage gap, non-pecuniary differences, the temperature, and legal systems are all factors that act as primitives for our “stock level” – so a shock to these will, in turn, lead to a process where the disapora is important for discussing the transition. Also this implies that the SR and LR effect of shocks to these primitives will be different.

This is also complicated by the fact that these are life cycle decisions etc etc.

WIthin this framework, there are a lot of cool empirical questions we can ask. And it also becomes more evident that the magnitude of migration changes due to policy shocks are less self-evident, or even easy to quantify, than at first meets the eye. Fun!

Unless we expect everyone to leave the country there must be some convergence to an equilibrium – small shocks could lead to large changes (and therefore significant shifts in flows), but I find everyone leaving a country not plausible.

Aren’t the NZers in Melbourne more intellectually, technologically and/or artistically inclined, compared with most of the other Aussie cities?

And several years back, I read a newspaper feature about some of NZ’s redneck element – think Allan Titford or Kyle Chapman – who had migrated to QLD’s Sunshine Coast. So emigration to Oz isn’t always a bad thing – Sir Joh is perhaps the best possible example. Not so good for QLD though.